Prime Minister’s Employment Generation Programme (PMEGP)

Prime Minister’s Employment Generation Programme (PMEGP)

The aim of the Prime Minister’s Employment Generation Programme (PMEGP_  is to create employment opportunities in rural and urban areas by helping Entrepreneurs setup ventures or projects or micro enterprises. PMEGP was launched on 15th August 2008 to give power to the first generation entrepreneurs to create micro enterprises. In this article, we look at the Prime Minister’s Employment Generation Programme (PMEGP) in detail.

Overview of Prime Minister’s Employment Generation Programme (PMEGP)

Prime Minister’s Employment Generation Programme (PMEGP) is a credit linked subsidy programme offered by the Ministry of Micro, Small and Medium Enterprises, Government of India. Khadi and Village Industries Commission (KVIC), is the nodal agency at national level for implementation of the scheme. At state level the scheme is put into practice through KVIC, KVIB and District Industries centre. In rural areas, the scheme is implemented by KVIC and State/UT Khadi and V.I. Boards in the ratio of 30:30:40.

The objectives of Prime Minister’s Employment Generation Programme are as follows:

  • To create employment opportunities in rural and urban areas by means of setting up of self employment ventures.
  • To offer continuous and sustainable employment to a huge segments of traditional and potential artisans and unemployed youth, so as to aid the arrest migration of rural youth to urban areas.
  • Scope:
  • The scheme is appropriate to all practical (technically as well as cost-effectively) projects in rural and urban areas, under Micro enterprises sector.
  • The maximum cost of the project permissible under manufacturing sector is Rs.25 lakhs and business or services sector is Rs.10 lakhs.
  • Only one person from family is qualified for obtaining financial assistance under the terms of the scheme.
  • Assistance under the Scheme is obtainable only for new projects.
  • The assistance under the scheme will not be obtainable to activities as indicated in the negative list under the terms of the scheme.

Eligible Beneficiaries

Individuals more than 18 years of age who are interested in setting up a new business are eligible for the PMEGP scheme. Also, Self Help Groups that have not obtained benefits under any other scheme are also eligible. 

However, only one person from one family is qualified. The ‘family’ is inclusive of self and spouse. There is no ceiling on income. Further, the applicant must have passed at least VIII standard for creation of project above Rs. 10 lakh in the manufacturing sector and more than Rs.5 lakh in the business or service sector. Only new projects for activities exclusive of the negative list of village industries notified are qualified for assistance under the Scheme. Finally, existing units which have by now obtained subsidy under any other scheme are not entitled.


Under the PMEGP scheme, loan of upto Rs.25 lakhs for the manufacturing sector and Rs.10 lakhs for the service sector can be sanctioned at Bank’s base rate + 1%.  The loan under the scheme is typically repayable in 3 to 7 years with an initial moratorium period of 6 months.

There is no collateral security required for the PMEGP loan. However, the personal guarantee of the promoter must be provided along with charge over the assets created out of bank finance. Eligible units can also be included under Credit Guarantee Fund scheme for Micro and Small Enterprises – CGTMSE. (Excluding the Margin Money or subsidy component).

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